Benefits of Dividend Growth Investing

Benefits of Dividend Growth Investing

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

John D. Rockefeller

Dividend investing is a way of buying stocks that pay regular dividends on your investments. Those dividends represent a portion of the company’s profits paid to investors.

Some people might find investing in dividend stocks boring. That may be for some folks. However, I find it exciting, not tedious, to collect this income from high-quality companies as part of its total investment return. Returns can come from three potential investment sources:  income, dividend growth, and price appreciation.

Dividend growth investing is a great way to build wealth. Dividends grow through compounding, reinvesting, less volatility, and satisfying investors with current income. A considerable part of Warren Buffett’s investment strategy, Berkshire Hathaway earns significant dividend income over $4 billion associated with stock purchases of high-quality companies in their portfolio. As Warren Buffett said, “Above all, dividend policy should always be clear, consistent, and rational.” 

Growth Stocks Pay Dividends

Sure, it is always exciting to find the next Amazon to invest in on the ground floor. It is the ultimate prize for venture capitalists, investment bankers, and investors, but they are tough to find. Growth stocks have been great places to invest in recent years and through 2020. They are at high valuations. Don’t forget some growth stocks pay reasonable dividends, such as Apple, Microsoft, and other tech-oriented names.

Dividend growth investing offers investors a lot of benefits that can complement growth stocks in your portfolio. Add dividend stocks to your investments to provide essential diversification.

The market has been absorbing many IPOs in 2020 (550 to date), causing some market turbulence. When there are many new offerings, institutional investors need to sell some of their growth stocks to raise money to participate in these new issues. Dividend-paying stocks can provide less volatility. 

What Are Dividends?

Most stocks usually pay dividends. More than 80% of the S&P 500 pay dividends. The S&P 500 dividend yield is currently low at 1.67% based on the strong stock market. However, the average yield is around 2% over the past decade.

Typically, stockholders receive cash dividend payments. The corporation’s board of directors usually declares a dividend four times a year. Some companies may pay this income monthly or annually.  These dividend payouts are rewarding investors with a share of the company’s profits.

Some companies may pay special “non-recurring” dividends, such as Costco Wholesale, rewarding investors for a company milestone or robust earnings growth. You can’t count on these payments to pay for your living expenses. 

Dividend Cuts Are Historically Rare And The Last Resort

If the firm is experiencing unprofitable times, the money may come from money reserves. Occasionally, a company may borrow to pay dividends to maintain its reputation for consistency. The safety of the dividend is always on investors’ minds. Most companies view a dividend cut or suspension as a last resort impacting their reputation and investor confidence about the dividend’s sustainability. Dividend cuts or suspensions are relatively rare.

However, several companies quickly moved to reduce or suspend their dividends temporarily in 2020 as the pandemic caused a severe economic downturn as lockdowns occurred. In recent months, many dividends have been reinstated, increased, or for some companies, initiated for the first time.

Dividend Growth Investing

Even in challenging times, individual companies have grown their dividends. Find the highest quality companies with longstanding track records to increase their dividends and survive a range of market environments. These companies are particularly desirable to find as they are dividend-paying royalty.

“Dividend Aristocrats”

To be part of this elite group of the S&P 500, “Dividend Aristocrats,” a company must have raised its dividend consecutively for 25 years or more. They must also meet specific minimum size and required liquidity. Initially, only 26 companies fit high-quality dividend payers’ profiles based on their strong histories of revenue and earnings growth, solid business fundamentals, and strong company management. These stocks have attributes of both growth and value investing, which we discuss in this article.

As of December 2020, 65 companies are Dividend Aristocrats. Some companies have fallen off the list, replaced by others, particularly during the Great Recession. Dividend Aristocrats’ dividend yield is usually 50 basis points above that of the S&P500 dividend yield, or closer to 2.5%. Many of the stocks carry yields in the 3+% range.

To invest in dividend growth stocks, you don’t necessarily have to limit yourself to this elite group, although it is a great place to start. Look for securities that have similar attributes of dividend growth, above-average yields, and sustainability. As recently as November 2008, Dividend Aristocrats delivered an average of 4% yields.

8 Benefits of Dividend Growth Investing


1. Fits With A Long Term Perspective

When investing, use a long term strategy instead of short term trading. This strategy recognizes that stock values increase over the time horizon despite intermittent market volatility. When investing for dividends, you collect cash payments through your continued stock ownership, even if the company did poorly. A side benefit of holding stocks for more than a year may be the ability to pay lower taxes through capital gains and loss strategies if they are qualified dividends.

2. The Power of Compounding

Compounding, or earning interest on interest, is a powerful way to build wealth. As we already said, investors are encouraged to keep stocks longer when they collect regular dividend payments, aligning with a Buy/Hold mentality. By reinvesting your dividends, you can accelerate the compounding benefits in your investment and retirement accounts. We discuss compounding along with other financial concepts you should know in this article.

An automatic dividend reinvestment plan (DRIP) is a program offered by your brokerage firm, mutual funds it exchange-traded funds (ETFs)  that allow investors to have their dividends automatically used to purchase additional shares of the underlying security.

3. Dividend Stocks Are Less Volatile

Stocks that pay dividends tend to be less volatile. When markets undergo turbulence, stocks with yields tend to do better. While dividend payers are not as safe as Treasury yields sporting AAA ratings backed by the US government, they offer an alternative source of stable investment income. With lower risk-to-reward ratios, dividends provide an anchor to falling stock prices.

4. Investor Confidence In Corporate Financial Health

When companies pay dividends and increase their payouts, it gives investors confidence in the stocks they hold. Companies that consistently pay dividends tend to be well run, are transparent about their revenue and earnings growth, and reflect financial discipline. 

5. Creates Passive Income

Dividend stocks provide a great path to creating passive income. This kind of investing is particularly desirable for a range of investors–retirees or seeking to retire early–who want to supplement their income. Investors relying on fixed securities may find insufficient balances from interest income given the low-interest environment we have been experiencing in recent years. Dividend investing can play a substantial role in boosting returns based on higher dividend income.

The steady flow of dividend payments can be used for spending, funding living costs, or reinvesting the money into similar stocks. Generally, there are lower or no trading commissions to pay, and dividend income gets preferential tax treatment for dividends of stocks held more than 60 days.

An Example

How much dividend income do you need to support your lifestyle is dependent on your plans. If you are hoping to become financially independent, dividend investing can help you grow alternative income or help you pay your living expenses.  Back of the envelope calculations of annual dividend income can get you started. Let’s say, your portfolio consists of $1,000,000-$2,000,000 of dividend-paying stocks.

Assume your $1-2 million portfolio has an average dividend yield of 2%. Your annual dividend income would amount to $20,000 to $40,000. At a 3% dividend yield of a $1,000,000-$2,000,000 dividend investment portfolio, your annual dividend income would rise to $30,000 to $60,000. The greater your portfolio that consists of dividend stocks, the more you can count on this income.

Higher dividend yields of over 4% may grow dividends more slowly.  Don’t chase stocks carrying higher yields without doing some research.

6. Higher Return Potential

According to several studies, stocks that pay dividends tend to grow faster than those that don’t pay dividends. Dividend-paying equity has three sources to fuel total returns: dividend income, dividend growth, and price appreciation. Growth stocks without dividends are faster growers at higher valuations but tend to be more volatile without dividend income.

Dividend Growers Outpace Non-Payers

In a February 2020 study by Hartford Funds and Ned Davis,  average annual returns from March 1972 to the end of 2019 were 12.87% for dividend growers versus 8.57% for dividend nonpayers. Using these returns, a $10,000 investment in non-dividend paying stocks would have grown to $500,000, well below the $3.24 million in dividend growers over the 48-year timeframe.

Since 1926, over 40% of the US S&P 500 returns have come from dividends, with the rest contributed from price appreciation.

7. Portfolio Diversification

Investors should maintain a diversified investment portfolio among different asset classes. An investment portfolio with diverse growth stocks is not diverse. These stocks may provide higher returns, but they pose higher risks. Dividend-paying stocks are a welcome addition to diversifying your portfolio and can help balance non-dividend paying growth stocks. These stocks offer defensive protection in adverse market environments and generate income growth and long term price appreciation in profitable markets.

To diversify your investment portfolio, you need other asset classes–money markets, bonds, and real estate–besides stocks. However, in recent years, and especially in 2020, high yield savings accounts, treasury, municipal, and corporate bonds have been challenging places to find any income. Income generation is a priority for many investors.

Viable Alternative To Low Bond Yields

As such, we discussed dividend income as a viable alternative source to bond income. The Fed took aggressive action to expand the money supply due to the pandemic’s impact on our economy. These moves reduced already low-interest rates. We discussed these risks of extremely low-paying yields from debt securities for investors in this article. We consider dividend income from high-quality companies as a higher income potential compared to high-grade corporate bonds.

8. Provides Inflation Protection

Stock investments tend to outpace inflation. Inflation can dramatically reduce the purchasing power of your money over time. Saving money in bank accounts will do very little in protecting your money from inflation. The value of a bond may drop below what you paid for it if interest rates rise. Dividend investing provides better inflation protection than fixed bonds.

Many companies pay dividends above the rate of inflation.  Dividend growth stocks performed well in periods such as the 1970s when inflation was higher than currently.

We have had low inflation for such a long time that many investors forget the need to protect themselves from potential inflation in the future. The higher returns from dividend investing tend to outpace inflation reasonably well. They provide better inflation hedges than fixed-income investments unless you go to more risky high yielding bonds, which carry greater credit risk.

Seeking Dividend Growth Stocks

You want to find high-quality companies with vital track records in generating revenue and earnings. Companies carrying excess debt on the balance sheet may hamper the company’s ability to support or increase dividend payments.

New Dividend Payers

Some well-known growth companies offer dividends for the first time. Some companies initiate payments after a strategic achievement. Apple did not introduce its dividend until 2012 after CEO Steve Jobs passed away. The company had significant cash on its balance sheet, but Jobs didn’t favor distributions to shareholders. Other companies introduce dividends to compensate investors for slowing growth. High yields are a different kind of signal, not necessarily positive that you want to investigate further.

Free Cash Flow

Free cash flow reflects positive cash flow after capital expenditures point to a company that can handle sustainable dividend payouts. Companies in industries such as energy with high capital expenditures may have higher risks that can’t support dividends.

Some Ratios May Help Identify Good Companies With Dividend Safety


Is The Dividend Safe?

Dividend safety is essential if you are engaged in this kind of investing. However, a high dividend yield may be a red flag for a potential cut in the dividend rate. Review your stocks for these red flags. The calculation is straightforward: dividend yields are annual dividend per share divided by the current stock price. A dividend yield of over 8% would concern me. Like utilities or banks, may pay a higher dividend yield because there is less stock appreciation.

Reasonable Payout

A company’s payout ratio should be manageable for the long term. You can calculate the dividend payout ratio by dividing the annual dividend per share by the earnings per share. A 30%-40% payout is reasonable.

Healthy Dividend Coverage

The dividend coverage ratio (DCR) measures the number of times a company can pay its current dividend amount to shareholders. To calculate this ratio, divide a company’s annual EPS by its yearly dividend per share. A DCR over two is considered a healthy ratio.

How To Find Good Dividend Stocks

You can purchase dividend stocks individually. Do some research. You can buy select names that are part of Dividend Aristocrats, which is a great way to start investing. Alternatively, you can purchase low-cost index funds or exchange-traded funds that can readily provide a pool of high-quality dividend stocks. Buying mutual funds or ETFs would satisfy instant diversification, reducing the risk of potential dividend cuts or suspended dividends. If one or two companies do any paring of dividends in these vehicles, your pain would be minimal.

Here are a few ETFs and a Vanguard Mutual Fund to consider:

  • Proshares S&P 500 Dividend Aristocrats ETF, symbol NOBL
  • SPDR S&P Global Dividend ETF, symbol WDIV
  • ProShares S&P Midcap 400 Dividend Aristocrats ETF, symbol REGL
  • SPDR S&P Dividend ETF, symbol, SDY
  • CBOE Vest S&P 500 Aristocrats Target Income ETF,  symbol, KNG
  • Vanguard Dividend Growth Fund, symbol VDIGX


Final Thoughts

Investing is the best way to build wealth in the long term. There are many types of stocks to purchase and generate profitable growth. Dividend growth investing may provide three investment income sources –dividends, income growth, and price appreciation. To invest in these stocks, focus on high-quality companies with a transparent track record and financially disciplined management.

Thank you for reading! Please share with others if you found something of value. Visit us at The Cents of Money, where you will find a range of topics and subscribe to our weekly newsletter.




13 Ways to Earn Money From Paid Surveys (At Home, Online, & More)

13 Ways to Earn Money From Paid Surveys (At Home, Online, & More)

Who doesn’t like to have some extra cash in their pockets? The ease of earning extra cash online is precisely why online paid surveys are gaining immense popularity these days. You can easily take surveys for money, regardless of your location and skillset, and earn exciting rewards. If you’re wondering how to make money answering questions, you’ve landed on the right page. Although survey-taking is a straightforward venture, there are many ways to earn money by taking paid surveys. I’ve listed down how you can make money taking surveys and create a passive income for yourself today. Read along to pick the right option for yourself.

Ways to Earn Money from Paid Surveys

Let me guess, you’ve heard a bad review about survey sites from a friend of yours and are apprehensive about trying them out yourself. Hear me out; I’ll tell you how to make sure the same doesn’t happen to you. The reason most people fail to earn any money while taking paid surveys is because of bad choices. Believe it or not, there are millions of surveys circulating on the internet right now. Apart from quick paid surveys and high paying surveys, you can find sites that let you take surveys online, at home, and even in person. The trick to making good money using these sites is choosing a survey site that’s legit and offers the survey-taking mode that suits your needs, like the ease of payment or redemption flexibility. Below, I’ve listed down the best sites for paid surveys that are worth your time. Along with that, I’ve categorized them for you so you can pick the one that meets your needs.

Taking Paid Surveys Online On-the-Go

Taking paid surveys online is one of the easiest ways to earn money on reward sites. All you have to do is answer a few questions when you’re waiting for a bus or standing in line at your grocery store. However, to take paid surveys online whenever you want, you’ll have to choose dedicated mobile survey apps that you can access wherever you are. Here are my favorite survey apps that you can download and use right away.

1. InboxDollars

Anyone who has ever thought of paid surveys as an earning option knows about InboxDollars. It is one of the pioneering sites in the online rewards genre and offers legit tasks in return for quick money. The best part is, you’ll get $5 as soon as you download the app and become a member. Meaning, if you download the app on the way to work and start completing online tasks, you’ll have already earned some cash to cover your commute expenses by the time you reach your destination. Moreover, InboxDollars has a plethora of earning opportunities apart from paid surveys. You can play games, watch videos, and answer short opinion polls to earn points and redeem them for cash or gift cards.

2. LifePoints

LifePoints is another legit survey platform created by the well-known Lightspeed company in the early 2000s. It has more than 5 million members on board, clicking away on their phones for money. You can download its app easily on your Android or iOS smartphone and start taking online surveys right away. They partner with market research companies and let you provide your opinions to influence product development and ad campaigns. The app will transfer points into your online account as soon as you complete your first survey. Once you have enough points, you can redeem them for cash or gift cards. It’s a great survey option for moms as well as you can get cashback on routine shopping.

3. Swagbucks

Swagbucks is a popular site when it comes to taking paid surveys and reward tasks on the go. Swagbucks is the ideal platform for maximizing your earnings by using the small pockets of time you get throughout the day. You see, Swagbucks offers short surveys that take no more than 10-15 minutes to complete. Also, they do not screen you out of surveys when you’re halfway through, so you won’t end up wasting your time. Similarly, the platform has easy tasks like surfing the web, watching videos, and rating products. You can download their app for free and complete all these tasks whenever you want. Swagbucks has a low minimum payout threshold, so you can withdraw your earnings in cash or through gift cards within your first week of signing up.

4. Toluna

Toluna is one of the largest survey platforms on the internet. The good news is, it has a mobile-friendly app that alerts you when there are surveys available, so you can take them online whenever you want. It is free to sign-up on Toluna, although you will have to provide some details and complete your profile so they can suggest relatable surveys for you. Besides that, it has some of the most exciting survey options, so you’ll never get bored. You can answer questions about your T.V. habits or your food preferences. Also, the platform offers online focus groups and product testing options to increase your earnings further. You can download their free app right away and get started.

5. Pinecone Research

Pinecone Research is one of the highest paying survey sites out there. It has paid surveys that are worth $3 or more, depending on the length and genre. Most importantly, it has an accessible survey app that you can use to make money online regardless of location. Just download the app for free, and you’ll have access to a plethora of earning opportunities on your palm. Besides that, the platform holds frequent giveaways and sweepstakes for all its members. In these programs, you can easily earn around $500-$4500 if you’re lucky.

Taking Paid Surveys at Home

For those of you who don’t like the idea of taking paid surveys on the go, you can use your time to take paid surveys at home. Below, I’ve listed down the popular survey sites that don’t have mobile apps but are great for stay-at-home moms and dads and even teenagers to spend their time productively. If you spend an hour or so taking paid surveys on these sites every day, you can easily earn up to $50 per month.

6. PrizeRebel

PrizeRebel is one of my favorite paid survey sites. The sign-up process is free and takes no more than a few minutes to complete. After joining, you can access a long list of paid surveys to take on the site. Typically, it’ll take you around 5-10 minutes to complete a survey, unless you choose a lengthy one. The longer the surveys, the higher the pay rates. Most surveys pay about $0.5-$1 on the site, so you can get some extra change in your pocket immediately after using the site for an hour or two. Similarly, this survey site increases your pay-per-survey rates once you become a regular user. Meaning, the more time you spend, the higher rewards you’ll receive.

7. Vindale Research

Vindale Research is an excellent money-making site for those who want to earn from the comfort of their home. Here, you’ll find surveys starting from $0.5 and ranging up to $50 each. The price variation is because of the different topics and genres offered on the site. You can choose your topic of expertise while taking paid surveys, and the site will pay you for your credibility. Besides that, their payment rates vary according to the length and difficulty of the survey. A simple survey about food habits or shopping behavior may only pay $2, while detailed health and technology surveys can pay up to $30-$50. The high-paying surveys about health and technology make Vindale Research an excellent option for people who want to take paid surveys from home as part-time jobs. Also, they denote your earnings in dollars instead of points, so you know the exact amount if you want to redeem your money in cash or via gift cards.

8. Opinion Outpost

Opinion Outpost is another platform where you can get paid from surveys staying at home. The platform does not have a mobile app but has a user-friendly site that is easy to navigate, even if you’re a beginner. What’s more, the site pays you a $1 bonus just for signing up on the site. You can then take surveys worth $1-$5 and accumulate points in your account. Similarly, you can participate in product trials as well. Participating in product trials means the site will send free stuff to your home to test out and provide reviews. Furthermore, you can refer the site to your friends and earn $1 for every person who signs up through your link. Once you reach their $10 minimum payout threshold, you can withdraw your money in cash or via gift cards.

9. Branded Surveys

Branded Surveys is a website where you can take legit paid surveys sitting at home. Each survey is about 10-20 minutes long so that you can spend your time productively as a stay-at-home mom or dad. The site pays you immediately after you sign-up and offers 300 points for every survey you take. Moreover, you can take their short opinion polls worth 100 points while you’re completing your daily chores to maximize your earnings on the platform. Branded Surveys raises your level from Bronze to Silver, and later to Gold when you start accumulating lots of credits. The higher your level, the more access you’ll get to earning opportunities. You can later redeem your rewards through PayPal or in the form of gift cards.

Paid Surveys to Take In-Person

In-person surveys are some of the highest-paid surveys in the market. Why? Because you have to conduct credible research before you answer the questions put up for you. By creating in-person surveys and focus groups, paid survey sites can provide quality data for their market research partners. In turn, they rake in good money, which they share with their survey takes. If you have the time to go through legit research processes and provide truthful information for in-person survey sites, you can get profitable earning opportunities from the following websites.

10. Survey Junkie

Survey Junkie is hands down one of the best paid-survey sites there is. Apart from comfortable, short surveys, this site also offers legit in-person surveys that pay you about $150 per hour. If you’re interested, you’ll have to opt for the detailed studies and focus groups on the site. Once you’re selected, you can test products, conduct in-person surveys by visiting locations near you, and answer questions on a phone call. Each of these tasks pays around $50-$150, depending on the task’s difficulty, how much time you spend while doing it, and your data quality. The sign-up process is completely free, and the site has a low minimum payout threshold. A low payout threshold means you can get your first payout through PayPal or via gift card within days of joining the platform.

11. Ipsos i-Say

Ipsos i-Say is a legit platform for paid surveys. Several high-profile market research platforms back it; that’s why it offers in-person surveys and focus groups that pay about $150 per hour. You can either complete small surveys worth $5 on their site or opt for focus research groups depending on the time you have at hand. When you sign-up for focus groups, they’ll assign tasks where you’ll have to visit retailers and locations near you to collect data. Ipsos i-Say has a minimum of 500 points payout threshold. Once you reach the limit, you can quickly redeem these points through PayPal or via gift cards from Amazon or iTunes.

12. User Interviews

User Interviews is a dedicated platform for paid in-person surveys and focus groups. Unlike other sites that let you take short opinion polls, this platform allows you to participate in detailed in-person research programs. The sign-up process is free and takes only a few minutes to complete. You’ll have to provide necessary details about yourself, including your name and city of residence, so that the site can suggest appropriate studies for you. Typically, these in-person surveys are worth $75 for every thirty minutes you spend on fieldwork. You can check the payment rates on their site before you select a study for yourself. The studies range across various topics, including consumer goods, sports, technology, transportation, beauty, and health. This way, you can choose your topic of interest and have fun while earning money. This platform is currently only available for people in the U.S. and Canada, but they’re looking to expand their reach worldwide shortly.

13. Respondent

Respondent is a paid survey platform that allows you to take in-person surveys and also participate in focus groups. The platform works internationally and provides research opportunities worth $100-$250 to users worldwide. All you have to do is create a free account on their website to get started. After that, you can access their list of studies and select the ones that appeal to you. If you’re fit for the task, the site will send you an invitation. You can then choose the time that suits you and visit the location to conduct your research and collect data. You’ll get to keep the amount offered by the company, while the website takes 5% of your earnings as commission.

Final Thoughts

That concludes my list of the ways to earn money from paid surveys. Taking paid surveys isn’t just staring meaninglessly at a computer or mobile screen. You can participate in genuine research and data collections that influence consumer behavior and society in general. The payment options and the ability to earn decent cash in a short period make paid surveys a legit job you can take up in your free time or do it as a part-time job from home. If you still can’t choose whether you’d like to take surveys on-the-go, from home, or in-person, you can go to sites like Survey Junkie. You can use their app or website depending on whether you’re at home or outside. They let you avail of all three options so you can diversify your survey-taking approach according to your mood and availability. This article originally appeared on Your Money Geek and has been republished with permission.

How Biases Impact Your Investment Decisions During The Pandemic

How Biases Impact Your Investment Decisions During The Pandemic

We make investment decisions by relying on fundamental analysis to determine if a security is undervalued. If the stock market is efficient, the stocks’ prices should fully reflect all available information. Therefore, the market demonstrates rational pricing. As investors, we try to capitalize on any discrepancies on a particular stock or a new report not already accounted for to profit on that position.

Sometimes stocks may be mispriced because of the psychology involved in decision-making known as “behavioral finance.” This discipline can offer behavioral/emotional or cognitive biases to explain why markets or stocks are moving in a certain way. Learning about these biases can help us to shift these tendencies away and invest more wisely.

Having biases–cognitive and emotional– may cloud our judgment when making investment decisions. To read about how to overcome biases when making financial decisions see here. Since the coronavirus pandemic, we have changed many of our consumer habits to protect ourselves from exposure. We have quarantined ourselves to practice social distancing, buying products in bulk, and shopping online. We can make changes when needed.

Investing During The Pandemic

Stock market turbulence ensued soon after the required coronavirus-related lockdown. Investors quickly anticipated social distancing would pause non-essential activities. As a result, investors sold stocks related to suspended travel, vacations, airlines, gym memberships, restaurants, car rentals, and oil. The cruise line securities, such as the Norwegian Cruise Line, looked dead in the water. That turned out to be the bottom for those stocks. 

During the worst of the pandemic, investors flocked to stocks that are the beneficiaries of the “stay-at-home” trends:

  • Zoom Communications, Slack, and Cisco (owns Web-ex) help us communicate with loved ones, friends, colleagues, clients, and distance learning.
  • We used more streaming services such as Netflix, AppleTV, and Disney+ for binge-watching.
  • E-commerce providers (e.g., Amazon) attract those seeking bulk buying for groceries, toilet paper, and other essentials.
  • Teladoc provided video conferencing with medical professionals. 
  • Pharma and biotechnology companies: Pfizer, Johnson & Johnson, Regeneron, and Moderna, develop therapeutics and virus vaccines in the rollout stage.

Are We Opening Up, America?

Coronavirus cases are stabilizing, so our country’s full opening is likely in our near future.  The stock market has a different mindset, looking to the future, not necessarily responding to daily news. We, as investors, are affected by attitudes that may blind us from making reasonable decisions.  

Explaining How Biases Work

As sometimes irrational beings, we frequently depend on our intuition. However, sometimes we are unaware of how our gut feeling may be faulty. These biases affect how we think, act, and decide whether to buy or sell stocks. Often, we go against our better judgment. Learning how these biases work is a first step to guarding ourselves against becoming irrational when investing money in the market.

Biases are either cognitive or emotional. Each can lead us astray. They create behavioral patterns that may interfere with our investment choices. Cognitive biases mean we are potentially making decisions on established concepts that may or may not be accurate.

On the other hand, emotional or behavioral biases are not distortions in cognition but emotional factors that may lead to poor decisions. Emotional biases are ingrained in our brains and may be harder to overcome than cognitive biases. Marketers exploit these behavioral psychology traits to get us to spend more and buy impulsively. We are just as vulnerable when we invest in our portfolio.

 Biases That Impact Our Investing


1. Anchoring Bias

When shopping, anchoring, a cognitive bias occurs when we place a lot of value in the first information we get. We often rely on the listed price when we make price comparisons.

For example, seeing priced T-shirts that cost $700 in one store and another one that is $200 will cause the latter shirt to look cheap. The higher cost is your anchor price. Retailers often use a higher list price for coats on “sale” at $1,000 with a 75% markdown to $250. Now, that coat’s a bargain, but it may not necessarily be so.

Anchoring bias occurs in our buying and selling of assets. In real estate, say you purchased a 55-acre plot of land for $200,000 ten years ago. The “plot” is in a location that has been experiencing an economic downturn in recent years.

Needing cash now, you receive an offer to buy your land for $170,000. There are no other offers on the market. You reject this deal because you paid a higher price. However, your broker tells you that recent comparables are way down, and the $170,000 was a fair price. It may be years before you see another offer, and in the meantime, you may have to borrow to pay monthly bills.

The $200,000 anchor price distorted your view. You strongly prefer avoiding losses yet waiting longer may produce even bigger losses. 

Have you had this experience? It is not easy to admit you made a mistake either when you bought the asset at a higher price or by selling below your cost. I recently had to sell land at a lower price than I sought because I felt the market had changed fundamentally. 

Historical vs. Intrinsic Values

Investors often rely on the historical values of stocks or what they paid for the original shares. Anchors do not always reflect intrinsic value: the stock’s inherent value. Investors may be missing new information.

For example, if you looked where Microsoft shares historically were trading, you may not want to pay “up” for the shares now because they are much higher. If that were the case, no investor could buy any stocks now because they are all higher, notwithstanding the hit the shares took in March 2020. Many have recovered a bit chunk of that fall.

Our first impressions form perceptions. However, update those initial feelings, possibly with research rather than anchoring, to affect our decisions.

2. Mental Accounting Bias

Mental accounting is a behavioral bias referring to different values people place on their money.  Regarding investments, they are mentally accounting for their original costs separate from their profits on those shares.

Daniel Kahneman and Amos Tversky have engaged in several bias studies. When an investor who wants to raise cash is holding two stocks, one with a paper gain and the other with a paper loss, what will he or she do?

According to Kahneman and Tversky, this bias will cause the investor to sell the paper gain before the paper loss. Acknowledging the loss is more painful, but there may be benefits we are overlooking. Remember that the loss coming from the weaker investment may provide some tax loss benefits.

We feel the pain of losing money more than the pleasure of making money. By selling paper losses, we are converting an unrealized loss into a realized loss. That is, it’s a real loss.

I can recall the day (March 10, 2000) I loaded up on dotcom stocks, the peak, or the dotcom bubble for the NASDAQ Composite stock market index at $5,048.22. However, on March 13th I paid for several companies’ shares that by March 16th no longer existed. My husband brought the check over to our broker. She had a good laugh that morning on my poor timing as many dotcoms rapidly collapsed in value.

3. Confirmation Bias

“I never allow myself to hold an opinion on anything that I don’t know the other side’s argument better than they do.”       Charlie Munger

Confirmation bias is about selective attention. People will remember information selectively, interpreting data to support their existing beliefs, even if the evidence is ambiguous. We tend to agree with people who conform to our ideas.

Alternatively, we are dismissive of new information even if that provides evidence that is wrong but accurate. We often skim or do not read all of an article or report. You can see this behavior when a stock is dipping just as company results are out. Later, after management addresses analysts’ questions and provides more information, the stock may recover and be up for the day.

I sometimes see this bias when my students play the stock market game. For example, as a favored stock name drops, they look to support why it is down. I will see only one part of their argument presented. Yet, the opposite point of view also has merit. Looking at both sides allows them to consider that it may only be a short-term blip and a possible buying opportunity. Social media reinforces one side of a debate. That tendency is pervasive and used to protect our egos from thinking that may prove us wrong.

Zoom Communication Shares

This bias may hurt our abilities when making investment decisions. For example, buying Zoom shares in April 2020 was a home run, but it may be a different investment long term and a less obvious choice now. As a result of the pandemic, Zoom’s customer base has exploded in multiple areas. You should research the potential downside for Zoom shares if remote work fades if workers return to the office.

Zoom has several risk factors to probe. How will privacy concerns impact growth, increased competition, new customers remain when the pandemic leaves us and does the share price already reflect fair valuation? Ask relevant questions, and consider the pros and cons. Confirmation bias works when we may have a preference. It’s easier to make a quick analysis. Just make sure you have the relevant information to make your choice.

Talluria Study On Dots

Talluria et al. did a confirmation bias study. The researchers’ experiments sought consistency across different stimuli. In this case, the researchers asked the participants to view two successive movies featuring a cloud of small dots moving on a white computer screen.

Participants reported on the direction of the moving dots after the first movie. Participants indicated the dots’ movement after the first movie then noted how the dots moved after the second movie. They recorded the dots headed the same way. However, they were moving in opposite directions.

The experiments showed that the participants’ biases. The Talluria et al. study proved that people stick with confirmation bias even when it is an inconsequential decision. Confirmation bias affects our choices on what house or car to buy or which candidate we should hire.

4. “Bandwagon” Effect Or Herd Mentality

The majority of us fall for the bandwagon effect whether we consciously know it or not. The bandwagon effect (or jumping on the bandwagon) occurs when people fear missing out. This tendency occurs when investors follow other investors’ investment choices. The herd mentality happens when people mimic other people’s actions irrespective of whether we may be imitating irrational behavior.

This psychological trait influences stock analysts on Wall Street as well. At times, analysts will change their thesis on a stock. They become more positive on the stock because their clients were buying the shares for their portfolios. These professionals never want to be the last ones to change their rating either way and be viewed as the laggard or “me too” analyst. I found myself in that awkward position often enough.

Recalling An Analyst Experience

On the other hand, there is some difficulty standing apart from your peers.  As an analyst myself, I recall feeling pressured to either stand-alone on a stock or follow the herd. This particular time, I changed my rating from  “BUY”  to  “SELL”  on a favorite stock for reasons of a negative fundamental change in the company.

Within 24 hours, that company’s management “demanded” I fly down to their offices to defend my rating. I was the only analyst to go to a sell rating. Going to a sell rating was an unusual step as most companies would give the analyst the cold shoulder. It turned out that they were respectful of my opinion and listened to my advice. Only later did it look like the rating change was prescient. Within 6-9 months, the company had righted itself and was healthy again. And yes, I upgraded my rating to a buy.

When IPOs Are “Hot” And Sometimes Not

The bandwagon effect is noticeable when stocks first enter the public market. If you are fortunate to buy shares of a great company “going public” through its initial public offering (IPO), you can make good money. On the first day of trading, these stocks can average 20% higher or more. Beyond Meat, which makes vegetarian burgers and sausages, began trading at $25 a share, ending the day at $65.75. This price appreciation was among the most significant first-day pops of IPOs at that time. This stock continued its rise months afterward.

However, many stocks ultimately flop after the first-day IPO rise, such as Blue Apron. Investors clamored for Facebook’s IPO, which immediately rose after it began trading. However, it fell back to its IPO price of $38 at the day’s close. It continued to drop to below $18 in a few months. Yet, investors who aren’t able to buy at the IPO price may flock into the market, jumping on the exciting bandwagon after the new stocks begin trading, only to be disappointed later on. Among the best investors of all time and a proud contrarian, Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.

5. Framing Effect

We often make decisions influenced by the presentation of the information. Is the glass half-full or half-empty? Framing is often used in risky investment situations. Therefore, it may all come down to the presentation of facts and how it is received. For example, when company management release earnings result to the public, they can provide either option:

Option 1: “In Q2, our earnings per share (EPS) were $1.72, versus expectations of $1.75.”

Option 2: In Q2, our earnings per share (EPS) were $1.72, versus Q1 results of $1.69.”

The results in option 2 look more favorable because of its comparison to lower numbers in the previous quarter. Company management often frames its earnings by posting two different EPS numbers. The release may show the reported number and a second higher EPS result, excluding “one-time” charges or a higher tax rate. Investors’ problem is determining if it is a one-time event or will those charges repeat themselves in the future.

Amos Twersky and Daniel Kahneman did a lot of research in framing risk. They asked participants in their study to decide between two treatments for 600 people who contracted a fatal disease. People generally avoid risk when presented with a positive frame. Treatment A would result in 400 deaths, and Treatment B had a 33% chance that no one would die but a 66% chance that everyone would die. In their 1981 study, treatment A was chosen by 72% of people when framed positively as saving 200 lives. However, when presented with the same choice framed negatively as losing 400 lives, 22% of people selected it.

6. Ostrich Effect

Ever want to avoid bad news? You start to distract yourself with nonsense work, putting your head in the sand like an ostrich. I have done this more times than I would like to admit. It sometimes occurs when you are holding shares, and you ignore bad news a company has released, like missing their earnings target. Rather than sell the stock, you may delay making a decision. This bias is a form of selective attention. Yet, we may be missing information that proves that this is a buying opportunity.

The recent stock turbulence produced a spectacular drop in March. I knew that I had paper losses in my investment portfolio, so I avoided looking at my accounts. Having been around the block as an investor, I felt embarrassed, angry, and emotional at my cowardice. Realizing there were worse things than paper losses, I felt guilty knowing COVID-19 was taking lives.

“Feeling Paralyzed”

Around this time, I came across the excellent New York Times journalist James B. Stewart’s article, “I Became A Disciplined Investor Over 40 Years. The Virus Broke Me In 40 Days.” He wrote of feeling paralyzed even after experiencing many market crashes. Many investors were feeling the same drop in their stomachs while looking at their retirement or investment accounts.

Stock Declines Are Often Buying Opportunities

Coined by Galai & Sade in their 2006 study, the ostrich effect means “avoidance of apparently risky financial situations by pretending it doesn’t exist.” In its 2009 study, Karlsson, Lowenstein & Seppi researchers found that investors checked their investment portfolio’s value 50% to 80% less in imperfect markets. While we don’t want to know the bad news, it could be beneficial. Investment experts point out that imperfect markets could be substantial buying opportunities. Those who participate in the market may pick up beaten-down stocks if fundamentals are alright. Surprisingly, as quickly as stocks dropped in those weeks, they have recovered a large chunk of their prices.

An old Wall Street is saying that the market takes the escalator up and the elevator down. The saying means that the market drops faster than it rises. The uncertainty usually hangs over stocks like a cloud. However, recent trading has exhibited a rare anomaly where the S&P 500 recovered March 2020’s losses in days. I believe we may have many buying opportunities ahead unless the economy bounces back quickly, a challenging feat to accomplish.

7. Overconfidence Bias Aka Dunning-Kruger Effect

Ever sit next to someone at a holiday gathering when someone is spouting about a stock investment they just made? They are holding everyone’s attention and speaking confidently.  You may admire that person for their intelligence at first. Later, you may realize that it is not so. This bias is when people believe they are smarter and more capable, but they do not have the self-awareness to recognize it. They hold overly favorable views of themselves.

Experienced investors know the dangers of overconfidence. A few easy wins can make you feel brilliant. However, losses can be chalked up just as fast, especially during a pandemic. The cure for overconfidence is recognizing the mistakes you made by overlooking what should have been obvious. Only in hindsight are there clear signs you should have passed on that investment—the tendency to overestimate what we know is prevalent.

Be Humble When Investing

Humility, not overconfidence, is what is needed when investing. Brokers and financial advisers often post statements such as “Past success is not indicative of future performance.” They don’t want you to think they are overconfident because of what they have done in the past. They tamp down your expectations and their liabilities.

The overconfidence bias is sometimes known as the Dunning-Kruger Effect. In a Dunning & Kruger study testing humor, grammar, and logic, participants scored in the 12th percentile but estimated that they were in the 62nd percentile, overinflating their skills. They found that participants with overconfidence aren’t necessarily embarrassed to learn they had low scores because they see themselves positively. 

Overconfidence can get in the way of digging deeper into a topic, whether investing for yourself or others. You may genuinely believe that you know a lot in a particular area. Others like your boss know better and aren’t impressed. Losses speak more significant volumes to your clients.

8. Familiarity Bias

When you go to a gathering or a party, where do you go first? Most of us prefer looking for friends we know. Familiarity bias occurs when we instinctively favor what we know. When investing, we may select securities that performed well in the past overlooking other securities that may be better. When picking stocks, you always need to refresh your knowledge about the company.

Make sure that the stock’s fundamentals and strategies remain sound. If they are, that’s okay. You don’t want to select stocks solely because they are familiar to you. A good investor should always diversify her/his portfolio. Broaden your view by picking the best stock for your holdings, not just what is comfortable. That is not to say that holding an asset in your portfolio long term may be enacting familiarity bias.

Being loyal to owning good stocks with strong fundamentals but are undervalued are reasons to have them. Long-term holdings of good performing stocks are great strategies that don’t exemplify familiarity bias to your detriment.

9.  Status Quo Bias

Overnight we were forced to change our habits dramatically. As a result of the virus, we stayed home and bulk shopped, wore masks and gloves. What you own or use is “the devil you know.” We are creatures of habit. This bias refers to our preference for the current state of affairs. Making changes can be difficult. Data shows that switching jobs at the right time can be a smart move if it helps to maximize income. Yet, many of us resist even exploring the opportunity because of the switching costs like working with different bosses, co-workers, benefits, and systems we don’t yet know.

Investors with status quo bias may resist making changes, even if it is a financially smart move. We may even hold onto a “losing” stock rather than sell it because we continually expect a turnaround that may never come.

This bias is similar to loss-aversion bias, which says that what you own is more valuable. I felt overwhelmed by the recent stock market volatility. As the market declined, I began to sell some of my losing stocks with higher-risk portfolios to raise cash. Because I had a previous (bad) experience, I resisted selling large amounts of my winning stocks. Usually, those are the stocks that come back in value more quickly.

 Wine Values That Appreciate

Kahneman et al. wrote in a 1991 study about a gentleman known to have gotten several good Bordeaux wine bottles at low prices. The gentleman learned that the wine much appreciated from its $10 cost per bottle. It would fetch $200 at auction. Although enjoying this wine on occasion, this man would neither sell at auction nor buy at $200. This pattern reflects that people often demand much more to give up an object than they would be willing to pay for it. Our status quo bias suits us to hold onto this object we value, be it land, wine, or jewelry, rather than part with it.

Sometimes, we may stay too long in a far more risky portfolio we bought when we were younger and unencumbered. While it was appropriate, then, reconsideration of your current lifestyle now is essential. Speaking to a financial advisor at different stages of your life may help you realize that you should modify your investments. Your children may be approaching college years, as you should be thinking about your retirement planning. Diversification and risk allocation should be reviewed by you annually and conformed to your life stage and appetite for risk.

Automate Where Possible

Overcome this inertia by planning. If you recognize that you have this tendency of paralysis and not making changes, automate your bill payments and automatically enroll in the retirement plan at work if this is available. Consider target rate funds when investing. These funds automatically reallocate your investments based on changes in your age and risk tolerance. When you start a new business, plan for an exit strategy if things don’t work out rather than losing money if success is not in sight.

10. Risk Aversion Bias

Risk and returns are positively correlated. That means that if you seek low risk, you will receive low returns. Wouldn’t we all want to generate high returns with low risk? If you find one such opportunity, would you mind calling me? Risk aversion bias means we favor a certain outcome over a gamble, even if it meant lower returns. Conservative investors or those close to retirement age may choose a low-risk strategy to preserve their capital. A risk aversion bias could be under-investing their capital for a young investor with a longer horizon if they decide on a low-risk strategy.

11. Present Bias And Procrastination

This bias values the present when we are planning for the future. Present bias causes many of us to spend money on the latest new shiny object rather than save for retirement. As a result, we favor the present by not delaying our gratification. However, this bias comes at the expense of postponing our savings for retirement and other investments. Rather than saving our 401 k employer-sponsored retirement account by taking small amounts out of our paychecks, we may be overspending. That leads to ramping up big bills on our credit cards.

We procrastinate rather than thinking ahead to our detriment. It affects our health, including our financial well-being. This tendency suggests that some shop impulsively, ringing up unreasonable bills and saving less than we should.  Stephan Meier’s study in 2010 found present-bias minded individuals are more likely to borrow and accumulate higher balances on credit cards. That means your debt is growing at compound rates detrimentally rather than the positive compounding growth you would get in your retirement bucket.

12. Sunk Cost Fallacy

The feeling of throwing good money after bad arises in many investment situations. A sunk cost is a cost that has already been spent and permanently gone. The problem is that we tend to hold onto investments underperforming well past their time. It should be reasonably clear that it is sunk money. That is just a trap. Selling long-term losses may provide you with the end-of-year tax loss benefits. Although throwing good money at losing investment may seem easier sometimes, it is better to admit your thesis is not working. Investing is not a “set it and forget it” activity.

Don’t Make Bad Decisions Worse

Investing is not a “set it and forget it” activity. If you are an individual investor, you need to set price goals for each stock you buy. I have often sold stock after a 7%-8% price drop rather than wait until shares have dropped 25% when it gets harder to sell. If you are deliberately buying small amounts to a full position, then take advantage of improved dollar-cost averaging. Therefore, this is not a sunk cost fallacy but rather a strategy that provides lower costs for your shares.

On the other hand, I do trim stocks that rise 20%-25%, putting away small profits not to be too greedy. As another Wall Street saying goes, “Bulls make money, bears make money, pigs get slaughtered.” See this for more Wall Steet jargon explained.

Recognize those small losses will become more significant if you continue to spend or invest money you no longer support. By continuing down the road, you are making a wrong decision worse. Learn how to cut losses and consider that amount in the past.

13. The Halo Effect

Ever find yourself prone to first impressions? Many of us consider those early beliefs as important. We are often heavily influenced by one trait’s halo effect is but ignore other characteristics, whether good or bad. Sometimes certain people or companies can “do no wrong” because they have a Teflon surface. We prefer to make snap decisions rather than a thoughtful analysis which is needed.

Investors may choose well-known brands like Apple, Microsoft, and Johnson & Johnson because they and their businesses are well known. When Apple successfully rolled out several products quickly, its shares had the halo effect lasting well after the launch. While many companies maintain solid reputations for decades, be alert for changes that result in poor decisions.

Final Thoughts

As humans, we have biases that create blind spots in our lives. During this pandemic, we may become even more irrational. Our mindsets distort how we make investment decisions. We can outsmart these tendencies.  Instead, greater awareness will allow us to invest more wisely.  Be proactive and understand both sides of the argument to make informed choices. Take charge of your financial future.

Thank you for reading!

Did you recognize any biases you have? How do you overcome these tendencies when investing in assets? We would love to hear from you! Please subscribe to our blog and find more articles like this.



Ibotta Review – Your Ultimate Guide To Earn Cash

Ibotta Review – Your Ultimate Guide To Earn Cash

Ibotta is an amazing cashback app that helps you save money on all of your everyday purchases.

It’s my favorite of all the money-saving apps. This Ibotta review will help you decide if this app will be beneficial to you.

Spoiler alert: Unless you never buy anything, you will probably be able to save money with Ibotta.

Ibotta Review

This Ibotta review will cover everything you ever wanted to know about this money-saving app. You’ll discover what Ibotta is, how you can earn cashback from using it, and even how they make their money, so you’ll see that it’s a legitimate service.

What is Ibotta

Ibotta is an app that lets you earn cashback on purchases. It can be used in person at malls, big box stores, many grocery stores, or online at Amazon, and even on a few travel websites. Pretty much anyone can find a use for this app.

Is Ibotta Legitimate?

A big question people ask about Ibotta is whether it’s legitimate or not. Anything that professes to offer money for nothing has to be a scam, right? That’s a valid concern, but Ibotta is not a scam. It’s a legitimate company that does offer cashback on a variety of purchases.

Does Ibotta Really Give you Money?

Yes, Ibotta really gives you money! I’ve made over a hundred dollars just by uploading a few receipts.

It’s effortless to start earning with Ibotta. I made six bucks the very first time I used it while grocery shopping. I only spent a hundred dollars total during that trip, so that app basically saved me 6%. Who wouldn’t want to save money on groceries?

Though Ibotta gives beginners a ton of bonuses and easy ways to earn, if you aren’t much of a shopper, it will be harder for you to earn money after getting those initial bonuses. I went through a period where I only used it for grocery shopping, and sometimes I’d only earn ten cents on a given shopping trip. That’s not going to be FU money anytime soon, but those little things add up, so I happily take that small amount!

How Do you Make Money with Ibotta?

There are various ways to make money with Ibotta, and all you have to do for each of them is shop. You can earn cash back at supermarkets by uploading your receipt, get paid to shop at many stores using Ibotta pay, and link Ibotta to your online accounts to earn rewards for online shopping.

Uploading Receipts

Earning cash back with their receipt upload function is easy. I love it because it’s one of the only options for cash users to take advantage of cashback shopping. Unfortunately, for now, it’s only available at grocery stores, but everyone needs groceries.

To earn your rewards, log in to Ibotta and check out the deals they have at your grocery store of choice (and don’t forget to check the “any offers” section!). Tap the little plus sign (+) icon associated with the offer. From there, the item gets added to your list. After you purchase your items, log back into the app, and hit the “redeem” button on the bottom. Follow the instructions to take a photo of your receipt and upload it.

Ibotta may ask you to verify some of the purchases by scanning the product barcode. Once you verify your purchases, Ibotta will review everything and send you your cash. Usually, the process only takes a few minutes, but Ibotta cautions that it may take up to twenty-four hours.

Cash-Back at your Favorite Stores

Many of your favorite stores partner with Ibotta to offer cashback rewards on in-store purchases. Home Depot offers 2% cashback, Barnes & Noble offers 5%, Sephora offers 6%, and Michaels offers a whopping 7% cashback on in-store purchases. Many other stores and restaurants offer cashback in-store as well – be sure to download Ibotta for the full list.

Using Ibotta to get cashback at these places is a little complicated. It would be better to upload a receipt or scan your app at checkout regardless of the payment method. Unfortunately, that isn’t the case. Instead, you need to purchase a gift card with Ibotta pay, and then use that gift card to pay for your purchases.

First, you have to link a debit card to Ibotta Pay. One thing to note is that it must be a debit card. Ibotta no longer allows you to link credit cards. Then, you find your favorite retailer on Ibotta and purchase the gift card with them directly. You then use this gift card that you just purchased to pay for the items that you are buying.

I used this method at GameStop when I bought my Nintendo Switch, and although it was a bit complicated, I earned $17 cashback, so it was well worth it. Although you can purchase the gift card at home before you go to the store, that creates a challenge because you don’t know how much you will be spending.

I purchased my GameStop gift card right at the register, so I knew the exact amount that I would be needing. It was a bit awkward, as I took an extra minute to complete my purchase, but it was worthwhile to prevent overspending.

Earn Cashback with Online Shopping

Many of your favorite online retailers offer cashback when you shop online through Ibotta. To earn extra cash through online shopping, log into your Ibotta account, and then search for your favorite retailer.

For example, let’s say you want to shop online at Kohls. When you log into Ibotta and search “Kohls,” you’ll see a .5% cashback offer and a green “shop” button. When you click the “shop” button, you will be redirected to the Kohls website, where you can make all of your purchases. As long as you have logged in via Ibotta, and you can see the Ibotta offer at the bottom of the page, your purchases will be eligible for the cashback.

You will not see your earnings in your account until your order has been shipped and processed. This can take up to 90 days, but usually, it only takes a few days.

Hundreds of retailers partner with Ibotta to offer you cashback on your everyday purchases. Best Buy, Target, Banana Republic, Foot Locker, and Microsoft are just a small sampling of the stores with cashback offers available on Ibotta. Chances are, your favorite retailer offers cash pack as well.

Earn Extra Money with Bonuses

Ibotta keeps things entertaining by offering numerous ways to make money with bonuses. They make it incredibly easy for new customers to earn extra with the “In-store purchase” bonus and the ten-dollar sign-on bonus. They also offer monthly bonuses, seasonal bonuses, and other random bonus opportunities throughout the year.

Some brands also offer bonuses if you redeem their offers on multiple occasions. For example, I Dunkin’ Donuts bonus by redeeming the Dunkin Creamer offer three times when it was available. These bonuses are constantly changing, but many of your favorite brands, including Kraft and Pepsi, have offered them.

Make Extra Money by Referring Friends

A final way you can earn money with Ibotta is by referring friends. You get five dollars for each referral, and you get the money as soon as your friend uploads their first receipt and redeems their first offer.

Another cool thing about referring your friends is that you become a team, and you can help each other earn a little extra each month. Every person you refer becomes a member of your team, and as your team earns individually, you can collectively work towards earning team bonuses. Usually, the first level is only fifty cents, but that adds up over time!

Is Using Ibotta Time Consuming?

One of my top fears in using this app is that it would take too much time. I don’t want to do anything tedious to make a few cents. That’s not worthwhile to me. But fortunately, using Ibotta is easy and only takes a few extra minutes.

If you Scan Ibotta for offers while writing out your grocery list, it will only take you a few extra minutes. Uploading the receipt and scanning the barcode takes a minute or two, depending on how many offers you have. Sometimes you may only have ten cents, but other times you can score five to ten dollars’ worth of cashback offers in one go! All of those things add up.

How Do you get the Money from Ibotta?

One of the drawbacks of using Ibotta is that you don’t get paid immediately. You have to earn twenty dollars before being able to redeem anything. But, since Ibotta offers too many ways to make extra cash, it’s easy to get to the twenty-dollar payout threshold. A few trips to the grocery store and one or two online purchases should be enough to get you to that threshold.

I think it’s a little better to wait for the payout, though. You won’t notice a few cents being added to your account here and there, but you definitely will notice the twenty bucks. It’s a feel-good win.

What is the Catch With Ibotta?

Everything has a catch, and Ibotta is no different. The catch is that if you aren’t paying attention to what you are buying, you may spend more money than you normally would. For example, Ibotta had a fifty-cent cashback offer on Ball Park hot dog buns. Sounds good, right?

But Ball Park buns are generally two bucks and some change, and the generic brand is only 87 cents. If I had used that deal, I’d end up spending a dollar more on hot dog buns than I usually do! It’s easy to avoid that trap, though. You have to pay attention to prices. You still need to manage your spending for savings.

The other catch is that you sometimes have to switch brands to get a deal. I usually buy Coffee-Mate creamer, but there was a $1 cashback offer on Dunkin Donuts’ creamer. The Dunkin creamer was a dollar more (paying attention to the price!), but it was the larger quantity.

Using the deal got me the bigger bottle of creamer for the same price as the small one! I don’t mind switching brands on a few items to get a better deal. However, make sure you are paying attention to the price. Don’t use an offer if you’ll end up spending more in the long run.

One final catch is that you have to earn ten dollars’ worth of cashback rewards within 14 days of signing up to earn your ten-dollar sign-on bonus. One trip to the grocery store got me more than halfway there, so I’m sure most people will be able to achieve this challenge.

How Does Ibotta Make Money?

Ibotta is, at its core, a marketing company. When you use this app, you have to remember that you aren’t the customer. You’re the product. Ibotta makes money off of you by tracking your data and sharing it with their partners. The companies use this data to understand consumer behavior and learn how to market their products better.

Ibotta clearly states that they will be doing this in their privacy policy, which users consent to when they join the app. Under the section on how Ibotta uses the information it collects, it states:

“Perform aggregated, pseudonymous (unless otherwise consented by you) analytics that may be used for Ibottas and any third parties’ marketing, advertising, and data enrichment activities”.

This basically means that they use the information they collect to help their partners with marketing and advertising, but they combine the data so that no one person is singled out.

Ibotta also makes money by having users complete surveys or answer simple questions on some of their offers. These activities also offer their partners valuable data that can be used for better marketing campaigns.

A final way they make money is through affiliate sales. They offer a short video for users to watch and earn a small commission if they redeem the video’s offer. They may also earn small commissions for other offers that are redeemed.

Is Ibotta Right For You?

I hope this Ibotta review clarified all the questions you had about Ibotta and helped you realize that it is a legitimate company that really can help you save tons of money on your everyday purchases. If you don’t mind a company collecting your data (and most of us let Facebook do it for free), then it’s a perfect way to get cashback.

In my opinion, it’s the best cashback out there. So what are you waiting for? Head to Ibotta and start saving today!

This article originally appeared on Your Money Geek and has been republished with permission.

Money And Life Lessons From “The Queen’s Gambit”

Money And Life Lessons From “The Queen’s Gambit”

For a moment, she wanted to say something about the expansiveness of room service, even measured in pesos, but she didn’t. She picked up the phone and dialed six. The man answered in English. She told him to send a margarita and a large Coke to room 213.” Walter Tevis, author of The Queen’s Gambit (1983)

Have you seen Netflix’s most-watched miniseries, “The Queen’s Gambit,” yet? It is the story of Beth Harmon, an orphan after her mother commits suicide and takes place in mid-1950s Kentucky. Against all odds, Harmon becomes a chess prodigy, rising to become the world’s chess master while emotionally struggling with adoption, rejection, drug, and alcohol dependency.

I was fascinated by this “coming of age” drama. Harmon playing chess is a symbol for life and, specifically, for providing money lessons. As a metaphor, chess is not new. Chess is often symbolic of life, war, and survival. The famous physicist  Richard Feynman was said to have used chess to solve mathematical and scientific problems.

Valuable Money And Life Lessons


1. Find Your Passions And Purpose

Beth Harmon was a socially awkward child when she arrived at the orphanage. Alone in the world, an older girl, Jolene, takes her under her wings. Harmon is more of an observer in her small world rather than a social butterfly. She finds comfort in the “vitamins,”  which are tranquilizers dispensed by the orphanage to keep the girls calm. Prescribing these drugs in the mid 20th century was common practice.

Once Harmon gets a taste of chess, her social awkwardness evaporates as she finds herself on a more confident and purposeful path. From a burgeoning interest in chess, Beth Harmon discovers her passion for playing chess as soon as she learned how to play. with hard work, passion, and determination, she won games, prize money and was able to support herself and her adoptive mother. 

2. Keep Practicing And Learning

Beth Harmon’s first exposure to playing chess was through watching the orphanage’s janitor, Mr. Shaibel. He is an experienced chess player who plays alone in the basement. Mr. Shaibel initially discourages her from watching him but soon recognizes her strong interest. Mr. Schnaibel, a chess enthusiast, mentors Harmon who learns quickly. He gives her encouragement and gives her the first chess book, “Modern Chess Openings.”  She studied and practiced moves to quench her thirst for mastering the game.

Recognizing her growing talent, Mr. Schnaibel introduced Beth to the school’s head of the chess club, who invites her to play in the tournament. This tournament is Beth Harmon’s first challenge in encountering hurdles. The high school’s chess club was male-dominated. They initially do not take Harmon as a serious contender.

Beth took the sedative pills she received at the orphanage. The pills help her to visualize the entire game on the ceiling of her room. It clears her head, increases her confidence, and spawns her dependency on drugs, which becomes problematic later on.

3. Adopted, She Adapts To Her New Situation

Beth Harmon is adopted by a childless couple, the Wheatley’s, sticking with her chess passion. She quickly realizes her adoptive parents, Alma and Allston, have marital problems, and her adoptive father moves across the country.  Beth remained with her adoptive mom, Alma Wheatley, an alcoholic who requires some adulting. Beth provided financial support to her mother, who began to enjoy Beth’s success in the game.

Beth Harmon goes full throttle into the world of chess, signing up for chess tournaments across the country.

4. Overcoming Hurdles In The Male-Dominated Chess Game

In the mid 20th century, the chess game was played mainly by males, like the business world at that time. Chess was not always that way. Notable women are known to play chess: Mary, Queen of Scots, and Queen Elizabeth I. When Benjamin Franklin traveled to Europe, he played chess with socially important women.

Lyudmila Rudenko became the first female International Chess Master in 1950. However, Beth Harmon in the fictional series would have been playing in a male-oriented game as portrayed.

Overcoming Mr. Shaibel’s resistance to her playing the game was the first of many hurdles. Signing up for the first tournament in Kentucky exposed Harmon to males who initially saw her more as a curiosity until she proved her mettle. Her reputation grew as she won tournaments and cash prizes.

5. Set Goals And Have Strategies

As her winnings increased, Harmon set her sights on larger venues in different cities in the US. She dived into reading classic chess books by the masters learning each possible strategic move practicing through visualization skills. Taking tranquilizers regularly, Beth used the ceilings to envision the chessboard pieces and tried out different strategies to play in her next game.

Romanticizing the game, Beth Harmon said: “It’s an entire world of just 64 squares. I feel safe in it. I can control it. I can dominate it. And it’s predictable, so if I can get hurt, I only have myself to blame.”

Along the way, Beth met many different boys who became her friends and mentors. In her high school, girls invited Beth out to find out about the boys she was meeting at tournaments and did not know her. These girls fit the stereotype of women who went to school, got married, and had children and no career. This scenario was counter to Beth’s ambition to be top of the chess world.

Beth’s goals were to master chess, win tournaments in the US, travel to Paris, and ultimately play the Chess Master, Vasily Borgov, in the Soviet Union.

6. Financial Independence

From the start, Beth Harmon is fiercely independent and fits a different mold.  Women during the 1950s and 1960s were financially dependent on their husbands. As a successful chess player,  Beth Harmon became a role model for her adoptive mother, Alma. Alma was an accomplished pianist on her own but suffered from stage fright. She was never encouraged to play the piano, even in her home. Her estranged husband was unaware of his wife’s talent until Beth Harmon confronted him about abandoning his family without financial support.

As a result of Beth Harmon’s winnings and her rising star, she became financially independent and supported her mother.

Beth invested in herself. She used her earnings to buy chess books, a travel chess set, and magazines to learn about the games’ strategy.  She shared her winnings and encouraged her mother to travel to the tournaments in different markets. Beth and her mother became very close, supporting one another.

At times, Beth was concerned about overspending on the hotels, meals, drinks, and snacks. After all, she was footing the bill for everything.

7. Risks And Rewards

 Throughout the series, Beth Harmon discusses the specifics of chess with the friends who mentor her. The discussions are intense, intuitiveness,  energetic, and displays of genius among these avid players. They know chess well. To the amateur or non-player like myself (who enjoyed the series), it was most intriguing how they played a psychological game of wits.

Each player has only one option: to win this existential game as survival of the fittest. Risks and rewards hang in the balance as they discuss the opening move of the game.

Opening Moves

The Queen’s Gambit, the series, is named for one of the oldest openings that are still commonly played today. This opening move secures control over the center of the board. Garry Kasparov, the Russian grandmaster, consulted for the series, lending authenticity to the game. The chess pieces are the player’s possessions; they use their skills, time, energy, tactics, and patience to win this game. You can almost feel the brain waves make sounds.

Chess is like watching two people negotiate at the bargaining table. The stakes are high for each to battle the other. Risks rise with each chess win, along with the rewards of the game. As you win at one table, you move on to a stronger player until the tournament’s two strongest players are left to play.

Chess And Investments Require Discipline

Making investments are similar. You can start with a small amount of money to get the feel of investing in stocks. The stakes increase as you add more money to your investments, but you can lower your risk by diversifying your portfolio rather than investing in individual stocks. However, diversification in a pool of stocks through an indexed mutual fund reduces your risk and returns. When you make investments, you need to remain disciplined to lessen your losses.


8. Be Confident But Don’t Fall Prey To Overconfidence

“The key is not to be tentative. You have to play with absolute confidence.” Benny Watts

From the beginning, you recognize Beth Harmon’s confidence in herself and her game. Tested, she occasionally falters. The viewer cheers her on, as do her competitors, who she quickly demolishes. Beth gains energy from her passion for becoming the greatest chess player in the world. Those she competes with are soon in awe of her.

Beth defeats Harry Beltik, a champion player, in her first tournament at the high school. Later, he mentors her, bringing the best chess books to find out she read most of them. Later, Benny Watts, the reigning US chess champion, becomes her mentor and friend as she moves onto higher ground. These friends identify Beth’s self-destruction streak, which nearly costs her health, reputation, and life.


9. Fighting Demons As Her Genius Becomes Her Burden 

A confluence of factors–alcoholism, drugs, and a paralyzing loss–nearly destroy Beth. On the road with her mother, she adds alcohol to the sedatives she continues to take to help visualize the game. When she travels to Paris, her goal is to win the game if she can play Vasily Borgov, the current Russian world champion chess player. From Paris, she plans her ultimate target, to play in the Soviet Union, become the world chess master, defeating all the Soviet players, and ultimately, Borgov.

In a rare departure from her typical discipline, Beth goes for drinks with a friend the night before her Paris match and stays out late. Overly confident and distraught over her mother’s death, she cannot perform up to her standards. She loses the game badly. Upon returning to Kentucky alone, Beth Harmon is a physical and emotional basketcase.

Jolene, her friend at the orphanage, scooped her up and restored her to her former winning self.  Jolene said, “Looks like you are at the bottom of a f*cking hold. And it’s looking like you dug it yourself. My advice? Stop digging.”

Her male mentors worried about her and added their support. Harmon gained substantially through her friendships and mentoring they provided

Failure Is Possible For The Most Successful

How often, after feeling the thrill of success, do we all get tested in our professional lives? Failure is possible for the most successful. We all falter in our careers. I know I have had that experience in my profession.

It can happen when you are the pinnacle of your success and can do no wrong in the eyes of your employees, your clients, and others. Maybe that sounds like an exaggeration, and to some extent, it may be. What do you do if your product rollout is a bomb or your stock recommendation turns out to be a dud? You recognize it for the failure it is, dusting yourself off, and start again. We overthink our mistakes, but it is better to move forward.

10. Stick With Your Convictions

As a chess player, Beth Harmon stuck with her convictions. Her friends often criticized her style of playing, which was “an all-out attack.” Later, Benny Watts tells her, “You play what’s best for you.”

Two women from a Christian group offered to pay for Harmon’s trip to the Soviet Union. However, there was a catch. They asked Beth to endorse the group’s statement as an American against the policies of the Soviet Union. Beth refused to do so and returned the group’s money. She stood by her principles to avoid politics rather than compromising her position for the sake of money she needed to travel.

11. Earning Income From Chess 

Many chess players support themselves by remaining on the chess tournament circuit. The intensity of the game may be challenging to envision chess as a means of earning passive income. If you enjoy the game, there are ways to become a professional player. Winners of the world championship typically win $1-2 million. Top events can yield prize money in the $50,000 range. Other ways to earn some money are playing at clubs, tutoring, sponsorships, making presentations, and writing books.

Final Thoughts

The Queen’s Gambit is Netflix’s winning series about the rise of an orphaned prodigy in the world of chess in the mid 20th century. There is much to learn about the chess game and its 11 valuable lessons about life and money.

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